Question

3. Intercompany sales of inventory (20 points) Parent Co. acquired 100% of Sub, Inc. on January 1, 2021. During 2021, Parent sold goods to Sub for $260,000 that cost Parent $170,000. Sub still owned 30% of the goods at the end of the year. In their pre-consolidation books, cost of goods sold was $1,050,000 for Parent and $375,000 for Sub. a. Prepare all consolidation entries related to inventory and cost of goods sold for 2021. b. Compute consolidated cost of goods sold for 2021. c. Assuming that the remainder of the inventory was sold to third parties during 2022, prepare the 2022 consolidation entry to recognize the previously deferred profit.

Answer 1

Answer page or coording to the given information. Cost of parent sold goods to sub = $ 260,000 cost of goods sold - 41050,000 (parent) cost of goods sold for Sub = $ 375000 Required ) inventory for subsidiary include 30% of goods bought from parent company.. journal entry to deförned unrealised profit deffered profit on 24000 inventory . a 24000 working $ 260000 x 30% = 48000 x (260000-140.000) 260000 78000 X 0.346153 = 97000 (ii.cost of goods sold of sub include 70% & goods purchased from parent

gowinal entry to eliminate unrealised profit page toa Lanstealised puuhit_Delt 63000 I cost of goods sold sub on 63000 working total unrealised profit on sale - ungealised poidit (260000 - 140000) a in inventory => 90000 - 94000 = 63000 (1) To eliminate the sales made to sub by parent. lansealised sale by 100 cost of goods sold ca 140000 (b) consolidated cost of goods sod 2021 ponticulours calculation cost of goods sold-parent (1050000 - (40000) Cost of gods sold-sub (345000- 63000) - Total c) journal entry Amount 880000 312000 1192000 inventory pr 97000 24000 I Deferred profit col